The business behind the show

Hollywood studios grappling with when and where to release their movies on DVD, digital

November 2, 2010 | 4:43
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For consumers already confused about when a movie goes on sale on DVD and Blu-ray versus its availability on video on demand, digital download, Netflix and Redbox rental and Netflix online streaming, life could get even more complicated.

On Tuesday at Blu-Con, a conference focused on the Blu-ray market, the presidents of home entertainment from five studios -- 20th Century Fox, Lionsgate, Sony Pictures, Universal Pictures and Warner Bros. -- gathered for a panel to discuss the state of their businesses.The Beverly Hills conference comes as studios are searching for new ways to boost revenue in the face of a slowly shrinking DVD market in which consumers are increasingly opting for inexpensive rentals instead of higher-priced purchases. Blu-ray sales and digital downloads are not growing enough to make up the difference.

The executives said the biggest issue they face is sorting through a proliferating array of distribution platforms and figuring out when and where to release their movies and at what price in order to maximize profits. Such staggered release strategies are known in Hollywood parlance as "windows."

"The most difficult conversations and the biggest meetings I have been involved in at the studio have been on this subject," said Universal's Craig Kornblau.

In a blunt assessment, Kornblau admitted that while consumers are eager to get their hands on movies through every platform as soon as possible, it's not always in the studios' interest. "We want to advantage methods that are more profitable," he told the audience of home entertainment industry professionals. "We don't have an obligation to give consumers what they want when they want it."

Most studios allow consumers to rent movies via the Internet or cable video-on-demand (VOD) the same day DVDs go on sale, though sometimes they push back that date for films they feel have particularly strong sales potential. Universal's animated box-office hit "Despicable Me," for instance, goes on sale Dec. 14, but won't be available on VOD until 23 days later, after Christmas shopping.

Universal is also one of three studios, along with Fox and Warner Bros., that has cut deals with Netflix and Redbox through which those two companies, the nation's biggest DVD renters, can't offer their films until 28 days after the DVD release. (Sony recently instituted a similar delay for some of its movies on Netflix.)

The effectiveness of those 28-day delays caused some disagreement on the panel. The Fox, Universal and Warner executives all said they have seen sales increases of 10% to 15% on their new releases compared with similar past titles. They attributed the better-than-expected performances to the fact that the movies weren't available to rent through Netflix and Redbox.

But Sony's David Bishop, whose studio signed a deal to offer DVDs the same day they go on sale through Redbox's $1 per night rental kiosks, has seen different results. "We have not seen any erosion on our sell-through performance," he claimed.

Warner Bros.' Ron Sanders said his studio's only problem with the 28-day window for Redbox and Netflix is that it's not long enough. "To be honest, I think it's a little short today versus what we probably need," he said. "That will get revisited as those deals expire."

Kornblau, meanwhile, said the studios are likely to play with the availability of movies through Netflix's Internet streaming service, which has grown rapidly in the last year and now accounts for more of the company's viewing hours than DVDs shipped through the mail. "While there are things in the Netflix system that are clearly cannibalistic [to sales], there are things we can change," he noted. "They can pay us more or we can reduce the quality of what we give them."

At the same time, the executives noted that the studios are expected to launch "premium VOD" for certain movies next year in which consumers can rent a movie within a month or two of its theatrical release and before the DVD goes on sale for as much as $20 or $30. That would create an entirely new window for the home entertainment business.

With all the talk of slicing windows in new ways in search of bigger profits, Fox's Mike Dunn admitted there's a potential downside: confusing or frutstrating customers. "If you slice the pie with too many slices, no one is satisfied," he said to laughs and nods from his fellow panelists.